Student borrowers in the U.S. are struggling to keep up with other kinds of debt even while college payments are frozen, and a surge in delinquencies is likely if the government’s debt-relief plan fails, according to a new study, Bloomberg News reported. Among borrowers who’d be eligible for President Joe Biden’s forgiveness plan, which is mired in a Supreme Court challenge, there’s been a “stark increase” in delinquencies on credit cards and auto loans during recent quarters, economists at the Federal Reserve Bank of New York wrote in a paper. “These missed payments suggest that some federal student loan borrowers are having trouble meeting their monthly debt obligations even though student loan payments are not required,” the New York Fed analysts wrote. “We expect these delinquency patterns to worsen if federal student loan payments resume without relief.” In that case, there’ll also likely be an increase in defaults and delinquencies on the student loans themselves, which could “potentially surpass pre-pandemic levels,” according to the New York Fed. About 15% of student borrowers were behind on their debt before the COVID crisis hit in March 2020, and the government announced a moratorium on repayments.
